Comp Exam #1

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The Alignment Test

(1) alignment with the business strategy; (2) aligned externally with the economic and sociopolitical conditions; (3) aligned internally with the overall HR system

Egalitarian pay structures

-have fewer levels and / or smaller differentials -Structures can also vary from layered to de-layered

layered

-more hierarchical -less egalitarian in terms of number of levels

Marginal productivity theory argues that employers pay _____. A. use value B. exchange value C. surplus value D. differential value

A

correlation coefficient

A measure of how changes in one variable are related to changes in another variable is the ____.

merit pay

A reward that recognizes outstanding past performance. It can be given in the form of lump- sum payments or as increments to the base pay. These programs are commonly designed to pay different amounts (often at different times) depending on the level of performance.

In a study, causation can be best established by?

Accounting for competing explanations, either statistically or through control groups

Which of the following tests of competitive advantage is probably the easiest test to pass?

Alignment

When cooperation is important for successful organization performance, the best form of pay is _____. A. tournament B. egalitarian C. hierarchical D. institutional

B

Which form of pay does NOT permanently increase labor costs?

Cash Compensation Incentives

internal alignment

Comparisons among jobs or skill levels inside a single organization

external competitiveness

Compensation relationships external to the organization; comparison with competitors

Customer-focused pay strategies are most likely to use?

Customer Satisfaction Incentives

Basic fundamental objectives

Efficiency Fairness Compliance Ethics

Entitlement

Employee belief that returns and/or rewards are due regardless of individual or company performance

Which of the following is true of procedural justice?

Ethicality and information accuracy are two critical dimensions of procedural justice

employee contributions

Incentive plans and Performance-based pay increases

Pay system policies

Internal alignment External competitiveness Employee contributions Management

In the formula for predicting performance, the component most closely related to compensation is _________

M

do most managers read research in HR management and compensation journals?

No

When organization performance declines:

Performance-based pay plans do not pay off (example of a vicious cycle)

virtuous cycle

Performance-based pay that shares success with employees does improve employee attitudes, behaviors, and performance

pay system management

Policies related to managing the pay system

stock options

Pro - sense of ownership will improve performance Against - granting employees too much ownership dilutes stockholder wealth Executive pay

Factors used in defining equal work according to the Equal Pay Act

Skill Effort Working Conditions Responsibility

Most unions prefer which of the following?

Small pay differences between jobs and seniority-based promotions

Which of the following is often the largest component in an executive pay package?

Stock options

Are pension and health benefits a very large component of total compensation for many large companies?

True

Human capital

When skills and experience add value, more pay is commanded

Content refers to the:

Work performed in a job and how it gets done

Reinforcement Theory

a behavior which has a rewarding experience is likely to be repeated

Most firms do not have generic strategies but use ______________________.

a blend of cost and innovation

Marginal productivity theory

employers pay use value

How an organization positions its total compensation against its competitors is part of _____________________ strategic choices

external competitiveness

According to the text, which of the following decisions should be made jointly?

external competitiveness and employee contribution decisions

Comparisons based on the forms of compensation used by other companies are part of _________.

external competiveness

Declining organization performance __________ the risks facing employees—risks of still smaller bonuses, demotions, wage cuts, and even layoffs

increases

If a company wants to restructure its pay plan without increasing labor costs in the long run and while retaining its top employees which of the following examples would be the best strategy?

increasing incentive pay and decreasing base pay

A major challenge in the design of future pay systems is how to better satisfy __________________________

individual needs and preferences

Whole Foods' shared-fate philosophy of limiting executive salaries to no more than 19 times the average pay of full-time employees is an example of which strategic pay decision?

internal allignment

The difference between exchange value and use value surfaces when _______________________

one firm acquires another

Technology used in producing goods and services influences the _________________, the work to be performed, and the skills/knowledge required to perform the work

organization's design

The role non-HR managers play in making pay decisions is called _________.

ownership

delayered

several levels of jobs titles are removed

sorting effect

the effect that pay can have on the composition of the workforce

Procedural fairness

the process used to make decisions

Incentives do not permanently increase labor costs because?

they are a one-time payment

Which of the following is a fundamental strategic choice at the corporate level?

what products and services should the firm offer

The most common bases for determining internal structures are:

work content and its value

AMO Theory

•The theory states that performance (P) is a function of three factors: ability (A), motivation (M), and opportunity (O).

In a strategic approach to pay, internal alignment is the ________ issue to be decided (refers o order of issue to be decided according to the text)

2nd

Tournament

all players play better when the prize differentials are larger.

The well-defined jobs at McDonald's and their small differences in pay are an example of a(n) ________ internal pay structure

closely tailored

Internal alignment is sometimes called ____________

internal equity

Egalitarian pay structures have all but which of the following characteristics? A. Few levels B. Small differentials C. Supports equal treatment D. Supports individual performers

D

In the context of the impact of internal structures, which of the following statements is true?

High performers quit under more hierarchal systems when pay is based on performance rather than seniority

factors that shape internal pay structures

Human Capital Work Design Overall HR policies

variable pay may also be called?

Incentives

merit bonuses

also based on performance rating but are paid in one lump sum rather than a permanent change to base pay

________ is the key to attracting, retaining, and motivating employees with the abilities necessary to execute the business strategy and handle greater decision-making responsibilities

compensation

A compensation system focusing on operational excellence is most closely associated with a(n) ________ strategy

cost cutter

A compensation system focusing on system control and work specifications is most closely associated with a(n) ________ strategy

cost cutter

A compensation system that focuses on competitors' labor costs is most closely associated with a(n) ________ strategy

cost cutter

Compensation systems focusing on competitors' labor costs typically follow a ______________ strategy

cost cutter

Compensation strategy, HR strategy, and business strategy ultimately __________________________, relative to competitors

decrease costs or increase revenues

Joshua believes that treating employees equally will improve their job satisfaction, which in turn will increase their work productivity and performance. In accordance with his beliefs, he wants to reduce the number of job levels and the pay differentials between the levels. In this case, he is most likely to use a(n)?

egalitarian pay structure

Which of the following policy decisions directly affects employees' attitudes and work behaviors?

employee contributions

differentiated strategy

focus is on providing unique or innovative products at premium prices

cost-cutter strategy

focuses on efficiency, doing more with less, and minimizing costs. It encourages productivity increases, and specifying in greater detail exactly how jobs should be performed

Merit increases

given as performance-based increments to the base pay

Greater pay dispersion is related to __________ turnover among executives

higher

External factors are dominant influences on jobs filled via?

hiring graduates

Research investigating high-performance workplaces found that performance-based pay ________ when combined with other high-performance practices

improves attitudes and behaviors

if the objective is to increase customer satisfaction what forms of pay might you use?

incentive programs and merit pay might be used to pay for performance

differences between incentives and merit increases

incentives do not increase the base wage, whereas merit does increase the base wage

differences between merit adjustments and an incentive payment

incentives do not increase the base wage, whereas merit does increase the base wage

Troubled Asset Relief Program

includes restrictions on executive pay and discouraged executives from taking "unnecessary and excessive risks."

Career growth, hierarchy, and flexible design are most closely associated with the ________ aspect of mapping a total compensation strategy

internal alignment

R2

is a squared correlation that tells us what percentage of the variation is accounted for by the variables we are using to predict or explain

Research shows that ________ will effectively shift an organization in a downward performance spiral into an upward one

it is unclear what compensation practices

All organizations that pay their employees have a compensation strategy even though __________________________

it may not be shared or written

An organization whose profits or market share is increasing is able to pay ___________ bonuses and stock awards

larger

Compensation is often a company's _________ controllable expense

largest

Organizations in a turbulent and unpredictable environment requiring flexibility in jobs and work processes are likely to be more successful with a(n) ________ internal pay structure

loosely coupled

Issues of transparency, technology, and choice are most closely associated with the ________ aspect of mapping a total compensation strategy

management

What has the greatest instrumental value according to the text?

monetary/cash

Whole Foods' shared-fate philosophy

monthly team performance, in terms of revenue per hour worked, directly affects what the team is paid

According to the Hudson survey, which of the following is the single thing that would make 41 percent of U.S. workers happier?

more money

the relative proportion of U.S. firms using merit pay increases

most

In mapping a total compensation strategy, the question of how important compensation is in the overall HR strategy is part of ____________.

objectives

In the context of pay relationships, which of the following is illegal in the United States?

paying on the base of one's age

how do managers seek internal alignment within their organizations?

paying on the basis of similarity among jobs

Trying to measure an ROI for any compensation strategy implies that _________

people are "human capital"

Most job structures are best described as:

person and job based

James says, "I don't trust the way the company determines pay rates in my department." If James feels this way despite being happy with his current salary, he is most likely concerned about?

procedural justice

you need to recognize an example of a relational return

psychological •Recognition and status, employment security, learning opportunities, challenging work, and so on.

Labor unions support _______ pay differentials.

small

customer-focused strategy

stresses delighting customers and bases employee pay/incentives on how well they do this

Equity Theory

suggests employees judge the equity (fairness) of their pay by making multiple comparisons

Base wage

the cash compensation an employer pays for work performed

Embedding compensation strategy within the broader HR strategy affects _________.

the compensation strategy

incentive effect

the degree to which pay influences individual and aggregate motivation

what do objectives guide?

the design of pay systems and provide the standards for evaluating their effectiveness.

A structure based on value typically ranks jobs on __________.

the relative contribution of: The skills, tasks, and responsibilities of a job to the organization's goals/objectives

An organization defines its strategy through?

through the tradeoffs it makes in choosing what to do and what not to do.

A compensation strategy should reflect an organization's ____________

values

pay model

Policies → Pay Techniques → Objectives

Pay differences among levels in an organization are called __________

differentials

potential problem(s) in egalitarian pay structures

•Equal treatment means high-performers feel underpaid. •They may quit or change their behavior.

Providing unlimited compensation choices to employees would meet with ____________________ from the U.S. Internal Revenue Service

dissaproval

innovator strategy

-stresses new products and short response time to market trends -compensation approach places less emphasis on evaluating skills and jobs and more emphasis on incentives designed to encourage innovations

Pay for temporary workers is based upon A. Small pay differences between jobs and seniority-based promotions B. Large pay differences between jobs and seniority-based promotions C. Small pay differences between jobs and performance-based promotions D. Equal pay raises for employees

A

Which of the following theories predicts that individual performance will be maximized when the pay differentials between job levels are large? A. Tournament theory B. Equity theory C.Marginal productivity theory D. Reinforcement theory

A

________ are related to greater performance when the work flow depends on individual contributors A. Egalitarian B. Hierarchical C. Tournament D. Institutional

B

Common bases for modern pay structures include all but which of the following? A. Content of the work B. Skills and knowledge required to perform the work C. External competitiveness and equity D. Relative value for achieving organizational objectives

C

In firefighting and rescue squads and global software design teams, a(n) ________ structure is most closely associated with higher performance A. hierarchical B. institutional C. egalitarian D. tournament

C

The problem that is most likely to be faced by organizations using an egalitarian pay structure is: Nina is a high-performing individual who works best alone. Which of the following companies is the most appropriate for her? A. A company that uses an egalitarian pay structure B. A company that pays its employees based on their seniority rather than their performance C. A company that uses a hierarchical pay structure to pay its employees based on performance D. A company that pays all its employees the same amount of money

C

Pay structure refers to the array of pay rates for different work or skills within a single organization.

True

how wage legislations affects wage structure

U.S. legislation forbids discrimination, and some legislation aims at differentials, producing a flatter wage rate structure

Characteristics of aligned pay structures

Undertake training Increase experience Reduce turnover Facilitate career progression Facilitate performance Reduced pay-regulated grievances Reduce pay-related work stoppages

Based on the opinions of 10,000 U.S. workers, Hudson found that when given their choice of unconventional benefits, most employees would select __________.

a more flexible work schedule

Union preferences are a major factor in ________ a total compensation strategy

assessing

Jacob works at PrimeClean Corp., a car wash company. He is asked to follow a set of instructions in a predetermined order to wash a car. All the details including the amount of washing liquid to use for each type of car are clearly specified. In this case, Jacob's company is most likely to use a?

closely tailored pay structure

Mich Inc., a hardware store, has a rating system in place that rates employees on their friendliness, usefulness, and product knowledge. Based on the ratings an employee receives, he or she gets an incentive. The compensation strategy followed by Mich is most closely described as a(n) _________ strategy

customer-focused

A compensation system using market-based pay is most likely to be part of a(n) ________ strategy

innovator

Flexible-generic job descriptions would most likely be used with a(n) ________ strategy

innovator

Organizations design their pay structures around _____

jobs and job level


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